How effective are microfinance programmes in serving the poorest? Empirical perspectives on outreach and impact from survey-based research

  • Asad Ghalib

Student thesis: Phd


The Microfinance Model has been applied extensively on a global scale as a strategy for reducing poverty and promoting development. The ensuing results have transformed both the social and economic lives of countless households worldwide. While some practitioners and academics consider the results to be indisputably affirmative, others have questioned the legitimacy and sanctity of the findings, and have even argued that in certain cases (gender empowerment, for instance) the impact has not been as promising as portrayed.This research centres on two questions: first, it measures the depth (as opposed to breadth) of programme outreach, i.e. how 'deep down' microfinance has been able to reach by gauging what category of the poor it currently serves; and second, it assesses the nature and extent of impact that programme participation has had on borrowers' livelihoods.The study draws on first-hand observations and empirical data gathered from 1,132 households across eleven districts in the rural areas of the province of Punjab in Pakistan. In order to accurately portray the multi-dimensional nature of poverty, the survey captures household characteristics over four dimensions divided into a multitude of variables.The study employs quasi-experimental research design and hence makes use of data collected by interviewing both borrower (treatment) and non-borrower (control) households. By applying the Principal Component Analysis (PCA) model, each household is allocated a specific poverty score in relation to all other households in the sample, to generate a poverty index which enables ranking and further analysis. In order to account for the problem of selection bias in the sample, the study uses propensity scores and assesses programme impact by applying both kernel and stratification methods, across the four dimensions on which poverty levels are captured.Study findings reveal that depth of programme outreach is poor, as there is a proportionately higher distribution of borrowers in the 'less poor' category (41 percent); the 'middle poor' are 35 percent, and the smallest proportion of borrowers served (22 percent) belongs to the 'very poor' category. Regarding programme impact, there are mixed results; although borrowers seem to fare better across around 70 percent of the indicators, a majority of these are not statistically significant. This suggests that despite producing some degree of positive impact, microfinance institutions still have to do a lot more if they are to make a real difference to the poors' livelihoods.Finally, policy implications that can assist towards both deepening outreach and enhancing programme impact are discussed.
Date of Award31 Dec 2010
Original languageEnglish
Awarding Institution
  • The University of Manchester
SupervisorMohammad Farhad Hossain (Supervisor) & Thankom Arun (Supervisor)

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